Internet-based DVR services, which allow users to record broadcast television …

Consumers around the world want a hassle-free way to record free, over-the-air television and play it back on any Internet-connected device. But every time a company creates such a service, it gets sued by copyright holders. Last year we reported on ivi, an American firm that argued that it qualified for a compulsory licensing regime designed for cable companies. The courts didn't buy it. Another American company, Aereo, is still fighting in court about whether its "tiny antennas" service is legal.

A similar fight has been happening in Australia. Optus, a major Australian telecom company, created a service called TV Now. Like ivi and Aereo, it acts as a virtual DVR, recording over-the-air television programs selected by individual customers and later streaming them to those same customers. Like its American counterparts, Optus quickly found itself in court facing charges of copyright infringement. On Friday, it suffered a major setback when an appeals court ruled the service was illegal.

Australian copyright law allows consumers to record television programs for "private and domestic use." Optus argued that programs recorded on a customer's behalf by TV Now qualified for this exemption because Optus's own role was purely passive. The trial judge, Justice Steven Rares accepted that argument in February, favorably citing an American precedent that has become the legal foundation for cloud music services.

But Justice Rares' decision was overruled on Friday by a three-judge panel. "Optus is not merely making available its system to another who uses it to copy a broadcast," the judges wrote in their opinion. "Rather it captures, copies, stores, and makes available for reward, a programme for later viewing by another."

And while the viewer is authorized to make copies of television programs for personal use, a company like Optus cannot make copies without the permission of the relevant copyright holders, the judges said.

"There is nothing in the language, or the provenance, of [the home copying exemption] to suggest that it was intended to cover commercial copying on behalf of individuals," they wrote.

Judge Rares had argued for allowing TV Now to qualify for the home copying exemption on the grounds of technological neutrality, noting that it would be irrational for the law to allow home recording using a DVR but not a hosted Internet service. But the appeals court was unconvinced. "No principle of technological neutrality can overcome what is the clear and limited legislative purpose" of the law, the judges argued. "It is not for this Court to re-draft this provision to secure an assumed legislative desire for such neutrality."

Optus told the Sydney Morning Herald that it was suspending the TV Now service in response to the decision. The paper says the telecom firm has 21 days to appeal the decision to Australia's High Court.

Timothy B. Lee / Timothy covers tech policy for Ars, with a particular focus on patent and copyright law, privacy, free speech, and open government. His writing has appeared in Slate, Reason, Wired, and the New York Times.